“golden cross,” which occurs when the 50-day SMA crosses above the 200-DMA

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“golden cross,” which occurs when the 50-day SMA crosses above the 200-DMA


As this first chart of SPY and its 20-day SMA shows, these lines often help traders understand where key supply (resistance) and demand (support) points should develop on a chart.

The reason I’ve chosen the 20-day SMA for this example is because it is essentially a measure of the past month (20ish trading days) of trading, which is a VERY important period of time followed by the world’s biggest traders and Hedge Funds.

But what is this line telling us really? 

Mathematically, a simple moving average is telling us that the average price close over the past X amount of days equals the final point on that line.

So, if I were to use a 5-day SMA as an example, the math would be:

5-Day SMA = (Day 1+Day 2+Day 3+Day 4+Day 5)/5

Easy, right?

But the one thing that most traders fail to remember is that, since this is based on trailing inputs, it is a lagging indicator. 


Keep that in mind as I show you this next chart, which is at the CORE of today’s discussion.

You see, the S&P 500 may be about to witness a bullish “golden cross,” which occurs when the 50-day SMA crosses above the 200-DMA.

Such crossovers tend to have bullish implications for the market. 

And the imminent crossover you’re looking at above is the result of all the energy that has been building during the sloppy bottoming activity that has been making the lives of a lot of retail traders very difficult over the past several months.


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